Texas law limits foreign ownership of real property: Part II | Global law firm

Overview

On March 27, 2026, the Texas Office of the Attorney General published Chapter 67 rules to implement and administer SB 17, the statute that restricts foreign ownership in Texas real property (including China, Russia, Iran and N. Korea). The rules became effective on April 26, 2026. Together with SB 17, the rules move the law from statutory prohibitions into an operational enforcement regime by defining key terms and affected parties broadly, reflecting the broader anti-circumvention approach of the government.

Natural persons

SB 17 continues to prohibit certain individuals tied to designated countries from purchasing or otherwise acquiring interests in Texas real property, while continuing to exempt US citizens and lawful permanent residents.

The statute continues to define “real property” broadly, including:

• Agricultural land and improvements
• Commercial, industrial, and residential property
• Water rights
• Minerals and related interests

The rules clarify that arrangements structured as successive short‑term leases may be treated as a covered interest if they, in substance, create a leasehold of one year or more.

Entities and control

The rules adopt an expansive definition of “control,” including the power to direct an entity’s management, policies or real property decisions.

Persons deemed to be in control include:

• General partners and managing members
• Executive officers
• Stockholders holding ten percent or more of voting interests
• Persons with present or future rights to acquire or dispose of the entity’s Texas real property

The definition of “purchase or otherwise acquire” also extends to transactions involving changes in control of entities that own Texas real property.

Together, these provisions broaden the scope of the statute to reach minority ownership interests and indirect acquisitions through entity-level transactions.

Facilitating entities and reporting obligations

The rules impose reporting obligations on “facilitating entities,” including lenders, title companies, insurers, brokers and appraisers.

A facilitating entity must submit a complaint to the Office of the Attorney General if it knows or should have known, after reasonable due diligence, that a transaction violates SB 17. This obligation extends to post-closing transfers used to effect a prohibited acquisition.

Failure to report may result in referral to applicable licensing or disciplinary authorities.

Enforcement architecture and process

The rules establish an enforcement unit within the Office of the Attorney General responsible for administering SB 17. The unit may:

• Receive and investigate complaints
• Issue guidance and respond to inquiries
• Coordinate with state agencies
• Refer violations to regulators

Proceedings and related records are generally confidential, and parties typically have at least seven (7) days to respond to investigative demands.

Practical implications

The Chapter 67 rules define the key terms in SB 17 broadly, limiting indirect and structural arrangements and potential loopholes, and expanding enforcement to real estate intermediaries beyond buyers, sellers, landlords and tenants, signaling Texas’s strong enforcement stance. While the statute is still being challenged constitutionally, to comply with the current effective rules, we suggest that market participants should be prepared in the following ways:

For buyers:

• Before signing a purchase contract, conduct a thorough review of the entity’s cap table and organizational documents to confirm that no individual or entity holding ten percent or more of voting interests, serving as a general partner, managing member or executive officer, or holding any option or contractual right to acquire or dispose of the entity’s Texas real property, is a “designated foreign person or entity” under Section 5.253 of the Texas Property Code.
• Be prepared to provide detailed ownership and control disclosures to sellers, their counsel and all facilitating entities.
• Where compliance status is uncertain, engage Texas lawyers to review and consider submitting a written inquiry to the OAG enforcement unit before closing.

For sellers:

• Carefully conduct independent due diligence on the identity and ownership structure of buyers in both direct property sales and entity-level transactions.
• Require buyers to make representations and warranties regarding foreign person status and full ownership structure, with appropriate closing conditions and indemnification provisions in the event those representations prove incorrect.
• Be aware that seller-side professionals who are themselves “facilitating entities” carry a mandatory complaint obligation if they know or should have known of a violation after reasonable due diligence.

For real estate professionals (Brokers, agents, title companies, lenders and appraisers):

• Implement a written foreign ownership screening questionnaire and entity ownership review protocol immediately to document “reasonable due diligence.”
• Train all staff involved in transaction intake, contract processing and closing on the mandatory complaint obligation.
• Document every due diligence step taken in each transaction—this documentation is the primary defense against a finding that the professional “should have known” of a violation.
• Understand that failure to report a known or reasonably discoverable violation may result in referral to TREC or another professional disciplinary authority, with potential license consequences.
• Engage lawyers who can advise on borderline transactions and respond to a civil investigative demand within seven (7) calendar days.